Instruction No. 002/2018-CSBF on Electronic Money Distribution Agents

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CENTRAL BANK OF MADAGASCAR BANKING AND FINANCIAL SUPERVISION COMMISSION

INSTRUCTION NO. 002/2018-CSBF ON ELECTRONIC MONEY DISTRIBUTION AGENTS

The Banking and Financial Supervision Commission (CSBF),

Having regard to Law No. 2016-056 of February 2, 2017 on electronic money and electronic money institutions, hereinafter referred to as the Electronic Money Law,

Having regard to Law No. 95-030 of February 22, 1996 on the activity and supervision of credit institutions, as amended,

Having regard to Law No. 2017-026 of February 8, 2018 on microfinance,

Having regard to Law No. 2016-004 of July 29, 2016, supplemented by Law No. 2016-057 of February 2, 2017, establishing the Statutes of the Central Bank of Madagascar,

Having regard to Decree No. 2014-1684 of October 29, 2014 appointing the Governor of the Central Bank of Madagascar,

Having regard to Decree No. 2016-151 of March 8, 2016 partially repealing Decree No. 2013-559 of July 23, 2013 and Decree No. 2017-917 of October 10, 2017 appointing the members of the Banking and Financial Supervision Commission,

Having regard to Instruction No. 001/2018-CSBF of April 12, 2018 on the exercise of electronic money activities by credit institutions;

DECIDES

Article 1: Object This instruction sets forth the rules regarding the selection and supervision of distribution agents mandated by electronic money institutions, designated EME, and by credit institutions exercising electronic money activities, designated EC.

Article 2: Selection criteria for distribution agents EME and EC designate distribution agents pursuant to a mandate contract as provided in Article 4.

EME and EC ensure that distribution agents meet the following criteria upon selection and at all times during the mandate period.

1. For natural persons:

• hold a valid identity document;
• possess a valid certificate of residence;
• hold a tax card or equivalent allowing for tax identification;
• maintain sufficient liquidity relative to the criteria set by the EME or EC to ensure fund availability for withdrawal by users;
• enjoy good reputation, justified by a sworn declaration.

2. For legal entities:

• be registered in the Trade and Companies Register or possess proof of commercial activity;
• maintain sufficient liquidity relative to the criteria set by the EME or EC to ensure fund availability for withdrawal by users;
• present directors who enjoy good reputation, justified by a valid clean criminal record.

Article 3: Selection procedures for distribution agents EME and EC define written procedures specifying:

• the selection criteria for distribution agents in accordance with Article 2 of this instruction;
• the selection modalities, including procedures for concluding mandate contracts;
• the control mechanism by the EME or EC aimed at ensuring compliance of the selection with internal procedures and regulations.

EME and EC verify the selection criteria for distribution agents through the documents and information listed in Annex 1 of this instruction, and ensure that distribution agent activities are carried out in a secure location accessible to the general public.

Article 4: Standard mandate contract with distribution agents EME and EC conclude a mandate contract with distribution agents, which defines, among other things, the nature of operations the distribution agent is authorized to perform as well as the corresponding conditions.

The contract is drawn up according to a standard mandate contract containing, in particular, the following elements:

• general information on the parties;
• mandated electronic money operations and the associated financial conditions;
• contract duration and modalities for its renewal or termination;
• dispute resolution method, notably the jurisdiction of the Commercial Court to adjudicate any dispute regardless of the agent's status;
• rights and obligations of the parties, notably those concerning:
  • security and vigilance mechanisms, including measures related to anti-money laundering and countering the financing of terrorism, personal data protection, and consumer protection;
  • confidentiality clauses for information and the use of customer data;
  • intellectual property rights in case of shared systems (software, license, ...);
  • the right of the EME or EC to revoke the agent based on findings from control reports conducted within the framework of agent supervision.
• display modalities for the authorization to operate as a distribution agent of the EME or EC.

EME and EC remain liable, towards their clients and third parties, for operations carried out by their distribution agents within the framework of the mandate contract.

The standard mandate contract and any subsequent amendments are subject to prior authorization by the Secretary General of the CSBF. Amendments made constitute addenda to the initial contract by any means leaving a written record, including any medium allowing for electronic signature.

The General Secretariat of the CSBF may request amendment of a mandate contract that does not conform to the standard mandate contract.

Article 5: Supervision of distribution agents by EME and EC EME and EC implement a control mechanism for the activities of their distribution agents to ensure compliance with the mandate contract.

To this end, EME and EC:

• include in their internal control and risk management system the monitoring of agent activities;
• establish a periodic control mechanism for their agents' activities;
• provide periodic training to their agents on any topic deemed useful for the exercise of electronic money distribution activities.

Article 6: Reporting obligations EME and EC communicate to the General Secretariat of the CSBF:

• information and documents regarding distribution agents as provided in Annex 2 of this instruction, according to the periodicities mentioned therein;
• all other information necessary for the exercise of its mission.

Documents are transmitted via the tele-declaration system managed by the General Secretariat of the CSBF.

Article 7: Penalties In case of infringement of the provisions of this instruction, the CSBF imposes against:

• the EME one or more of the sanctions provided for in Articles 108 to 111 of the Electronic Money Law;
• the EC one or more of the sanctions stipulated in Articles 49 and 52 of the Banking Law.

Furthermore, the CSBF is authorized to request the suspension of the designation of any new distribution agent by the EME or EC.

Pursuant to the final paragraph of Article 30 of the Electronic Money Law, the CSBF is authorized to request the exclusion of a distribution agent not meeting the selection criteria defined in Article 2 of this instruction.

Article 8: Final and transitional provisions This instruction enters into force upon its notification to the profession through the Professional Association and its publication on the website of the Central Bank of Madagascar.

EME and EC have a period of 12 months from the publication of this instruction to comply with the provisions of Article 2.

The annexes form an integral part of this instruction.

Done in Antananarivo, on 12 APR 2018 For the Banking and Financial Supervision Commission, The President,

(Signature) Alain H. RASOLOFONDRAIBE Governor of the Central Bank of Madagascar

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Annex 1

Documents required for the selection of distribution agents

Natural persons	Legal entities
- Valid identity document	- Articles of association and documents appointing directors
- Certificate of residence dated less than 3 months ago	- Extract from the Trade and Companies Register or other proof of commercial activity (tax card or equivalent,...)
- Tax card or equivalent allowing for tax identification	- To be provided additionally, for directors:
- Sworn declaration justifying good reputation	• Certified copy of a valid identity document
	• Extract from the criminal record dated less than 3 months ago

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Annex 2

PERIODIC DECLARATIONS ON DISTRIBUTION AGENTS

	Information and documents	Periodicity	Statement date	Declaration date
1. Information sheet	- Identity of the agent (natural person) or corporate name (legal entity). <br> - Administrative and tax information. <br> - Address of the distribution agent. <br> - Identity of persons responsible for the distribution agent's activity. <br> - Brief description of the main and related activities of the distribution agent. <br> - List and location of agents.	Annual	December 31	January 31 of the following year
2. Update of the agent list	- List of new, suspended, or revoked agents	Quarterly	End of quarter	15 days following the quarter
3. Agent supervision mechanism	- Periodic control report of distribution agents including statistics on incidents observed during transactions (fraud, theft, ...). <br> - List of suspended or revoked agents with related reasons	Semi-annual	End of semester	15th day of the month following the semester
4. Agent training	- Training program for distribution agents <br> - Report on completed trainings	Annual	December 31	January 31 of the following year
5. Anti-money laundering and countering financing of terrorism mechanism	- Verification report on regulatory compliance including a summary of operations or transactions subject to suspicious transaction reports	Monthly	End of month	15th day of the following month
6. Consumer protection	- Summary of customer complaints received at agent locations (classified by type, number, amount concerned,...)	Monthly	End of month	15th day of the following month

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